Nairobi County’s efforts to boost revenue collection have been dealt a major setback after the High Court declared its 2023 Finance Act unconstitutional, halting all charges introduced under the law for lacking a proper tariffs and pricing policy.

In a ruling delivered by Justice Bahati Mwamuye at the Milimani High Court, the judge faulted the county government for breaching constitutional principles of public finance and participation.

He said the county introduced new levies, fees, and rates without first developing and implementing a lawful pricing policy, contrary to Section 120 of the County Governments Act.

“The petitioner’s uncontroverted evidence shows that Nairobi City County did not develop, adopt, publish, or implement any tariffs and pricing policy before enacting the impugned Finance Act, 2023. Public participation involved presenting schedules of proposed fees without underlying policy or cost analyses,” said Justice Mwamuye.

The ruling followed a public interest petition filed by Nairobi resident Jared Ngisa Nyabuto, who argued that the law was being used illegally to burden residents financially without due process.

He sued the Nairobi County Government, the County Assembly, and the Speaker. None of them filed responses to challenge the petition.

The court declared all new charges under the Nairobi City County Finance Act, 2023 null and void, and reinstated previous rates under the 2022 Act or earlier laws.

“Accordingly, the levies, rates, and fees imposed by law and in force immediately before the enactment of the Nairobi City County Finance Act, 2023, which has been quashed, being those under the Nairobi City County Finance Act of 2022 or earlier shall now continue to apply and shall continue to be paid by all affected persons pending the enactment of a new Finance Act,” said Justice Mwamuye.

The Finance Act, 2023 had introduced several changes, including an increase in daily reserved parking for private use from Sh1,000 to Sh1,500 per vehicle, and an annual rise in loading/offloading zone charges from Sh220,000 to Sh250,000.

It also raised the cost of displaying vehicles for sale on road reserves from Sh10,000 to Sh15,000 per square metre per year.

In addition, the county had amended the Alcoholic Drinks Control and Licensing Act to raise the general retail liquor license from Sh25,000 to Sh100,000.

Small and medium-sized nightclubs saw their fees increase by Sh10,000 each, while mega transport firms with more than 100 vehicles had their annual trade licence fees raised from Sh160,000 to Sh200,000.

Taxi-hailing operators also faced a jump in application fees from Sh1,000 to Sh5,000, while on-street parking fees in non-automated zones in the city centre rose to Sh300 for saloon cars and Sh500 for pick-ups and vans, up from Sh200.

Justice Mwamuye ruled that these new rates were introduced without a legal framework to determine the actual cost of providing services, as required by law. He said the county must align all future revenue laws with constitutional and statutory provisions to ensure compliance.

The judgment is expected to impact Nairobi’s revenue collection plans and may force the county to revisit its budgeting process for the 2024–2025 financial year.